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20072007

CONTENTS

H. H. Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah

The Emir of the State of Kuwait

H. H. Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah

The Crown Prince of the State of Kuwait

Members of the Board 02

Chairman’s Message 04

Auditors’ Report 17

Pages 02 & 03 | IFA HOTELS & RESORTS ANNUAL REPORT 2007

MEMBERS OF THE BOARD

Talal Jassim Al-BaharChairman and Managing Director

Abdulwahab Ahmad Al NakibVice Chairman

Abeyya Ahmed Al-QatamiMember of the Board

James A. M. WilsonMember of the Board

Talal Bader Al-BaharMember of the Board

IFA Hotels & Resorts is currently engaged in over

30 projects in 12 countriesMiddle East

• Kingdom of Sheba, Dubai

• The Fairmont Palm Residence, Dubai

• The Fairmont Palm Hotel & Resort, Dubai

• The Palm Golden Mile, Dubai

• The Palm Residence, Dubai

• Laguna Tower, Dubai

• Mövenpick Hotel & Residence Laguna Tower Dubai

• Alabadiyah Hills, Beirut

• Four Seasons, Beirut

Africa

• Zimbali Coastal Resort, South Africa

• Zimbali Lodge, South Africa

• Fairmont Zimbali, South Africa

• Boschendal Estate, South Africa

• Legend Golf & Safari Resort, South Africa

• Zanzibar Beach Hotel & Resort

• Fairmont Kenya

• Kempinski Namibia

• Zilwa, Seychelles

Europe

• Yotel, United Kingdom

• Pine Cliffs Resort, Portugal

Asia (Thailand)

• The River, Bangkok

• The Lofts Yennakart, Bangkok

• The Lakes, Bangkok

• The Lofts Sathorn, Bangkok

• The Legend Saladaeng, Bangkok

• Northpoint, Pattaya

• Northshore, Pattaya

• The Heights, Phuket

• Kata Gardens, Phuket

IFA Yacht Ownership Club

• IFA Dubai

• IFA Beirut

• IFA Cannes


CHAIRMAN’S MESSAGE

IFA Hotels & Resorts - Financial Results 2007

Dear Shareholders,

Building on our success achieved in 2006, which saw the listing of IFA Hotels & Resorts(IFA HR) on the Kuwait Stock Exchange and our South African subsidiary, IFA Hotels &Resorts Limited (IFA SA), listing on the JSE Limited, it is with great pleasure that I announceon behalf of my colleagues and the Board of Directors, this year’s end profits of KD22.82million or 76.81 fils per share, achieving a 236% increase in profits compared to last year.We are also happy to announce to our shareholders share dividends of 15% bonus shares and 30% cash bonus for this period.

This impressive growth has been fuelled by a number of outstanding projects we have beenworking on in the past few years such as The Fairmont Palm Residence, The Palm GoldenMile, The Palm Residence and the Laguna Tower in Dubai.

In the Middle East, our most notable launch has been that of the Kingdom of Sheba resorton The Palm Jumeirah and the subsequent launch of Fairmont Heritage Place, Kingdom ofSheba; the first fractional ownership product to be launched in the region. The combinedvalue of the Kingdom of Sheba resort is in excess of US$1 billion and will cover 141,500square metres in a prime location on the crescent of the island.

In addition to this regional development, we have been focusing on a set strategy to extendthe geographic reach of IFA HR as a global mixed-use hotel and tourism resort developer.Last year, we pledged that the next 12 months would see IFA HR expanding into the FarEast, other areas of the African sub continent and into the Caribbean, and today, as we closethe fiscal year, we are making steady progress to achieve this goal. We are currently engagedin over 30 projects across more than a dozen markets including Thailand, Africa, Portugal, theUK, the Seychelles and the Caribbean.

The expansion of IFA HR into Thailand, after acquiring 24.9% of SET (Stock Exchange ofThailand) listed condominium developer Raimon Land, represents an important part of ourstrategy to enter the world’s most exotic destinations. Raimon Land currently has a portfolioof ten residential projects; six in Bangkok, two in Pattaya and two in Phuket. This moveprovides IFA HR with a stepping stone to pursue further growth and expansion throughout Asia.

Earning per share76.81 fils

30% cash dividends

Total profits (KD)22.82 million

15% bonus shares

Fiscal year results ending on June 30, 2007

30/6/06 30/6/07 Growth (%)

Total revenue (million KD) 13.38 32.64 144

Shareholders’ equity (million KD) 35.19 52.46 49

Net profit (million KD) 6.8 22.82 236

Earning per share (Fils) 22.73 76.81 238

Return on assets 5% 11.7% 133

Return on shareholders’ equity 20.7% 52.1% 151


CHAIRMAN’S MESSAGE (CONTINUED)

Continuing with this commitment, 2007 saw the opening of our London office, bringingour global portfolio to the doorstep of the UK investor. Located in the heart of the city,this office will also lead and manage our existing European projects while exploring futureinvestment opportunities.

In Africa, we entered the Namibian hospitality market with four hotels acquired through astrategic partnership with Ohlthaver & List, launched Fairmont Heritage Place, Zimbali inSouth Africa and increased our investments in Boschendal Ltd.

During July, we opened our first YOTEL hotel at Gatwick Airport. We truly believe the YOTELconcept represents the future and hope to see a YOTEL in the majority of international citiesand airports in the next few years. Several international locations have already beenidentified as prime opportunities for YOTEL including Dubai, the Netherlands, Singapore,Thailand, Germany, New York, Russia, India, South Africa and more.

Whether welcoming guests at YOTEL or expanding our Yacht Ownership Club to includethe Caribbean, we will continue our expansion plans while maintaining our commitmentto provide both our clients and shareholders with a great choice of varied investment andrecreational opportunities that yield first-class returns.

Already in our first quarter, we have announced our entry into the Seychelles with Zilwa,a mixed-use resort, and our new venture into wildlife hospitality with Legend Golf & SafariResort in South Africa.

The vision and strategy of IFA HR is largely due to the success that we have achieved throughcareful strategic planning with our key partners and investors. I would like to express mysincere appreciation to all of those who have supported our global expansion plans andhelped us to realise many of them. From our investors, shareholders, partners and customersto our hardworking and dedicated staff – thank you.

Talal Jassim Al-Bahar

Chairman & Managing DirectorIFA Hotels & Resorts

From our investors, shareholders, partners and customers to our hardworking and dedicated staff


THE IFA HOTELS & RESORTS PORTFOLIO

MIDDLE EAST

The Palm Residence, Dubai Four Seasons, BeirutKingdom of Sheba, DubaiThe Palm Residence, Dubai

Fairmont Heritage Place, Kingdom of Sheba, Dubai Mövenpick Hotel & Residence Laguna Tower Dubai

The Fairmont Palm Residence, Dubai Alabadiyah Hills, Lebanon


THE IFA HOTELS & RESORTS PORTFOLIO (CONTINUED)

AFRICA

Zimbali Lodge, South Africa Fairmont Zimbali, South Africa Zanzibar Beach Hotel & Resort, Tanzania Fairmont KenyaBoschendal Estate, South Africa

Zilwa, Seychelles Legend Golf & Safari Resort, South Africa

The River, Bangkok, Thailand



ASIA

The Lofts Yennekart, Bangkok, ThailandThe Heights, Phuket, ThailandNorthpoint, Pattaya, Thailand



Pine Cliffs Resort, Portugal

EUROPE

YOTEL, UK IFA Travel & Tourism IFA Yacht Ownership Club

AROUND THE GLOBE

Report on the Consolidated Financial StatementsWe have audited the accompanying consolidated financial statements of IFA Hotels & Resorts (AKuwaiti Closed Shareholding Company) (“the parent company”) and Subsidiaries (“the Group”),which comprise the consolidated balance sheet as at 30 June 2007, and the related consolidatedstatements of income, changes in equity and cash flows for the year then ended, and a summaryof significant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial StatementsThe parent company’s board of directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial ReportingStandards. This responsibility includes: designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of consolidated financial statements that are freefrom material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based onour audit. We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on theauditors’ judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditors consider internal control relevant to the entity’s preparation

and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of the Group as at 30 June 2007, and of its financial performance and its cashflows for the year then ended in accordance with International Financial Reporting Standards.

Report on Other Legal and Regulatory RequirementsIn our opinion proper books of account have been kept by the parent company and the consolidatedfinancial statements, together with the contents of the report of the parent company’s board ofdirectors relating to these consolidated financial statements, are in accordance therewith. We furtherreport that we obtained all the information and explanations that we required for the purpose of ouraudit and that the consolidated financial statements incorporate all information that is required bythe Commercial Companies Law of 1960, and by the parent company’s articles of association, asamended, that an inventory was duly carried out and that, to the best of our knowledge and belief,no violations of the Commercial Companies Law, or of the parent company’s articles of association,as amended, have occurred during the year ended that might have had a material effect on thebusiness of the Group or on its financial position.


CONSOLIDATED FINANCIAL STATEMENT AND AUDITORS’ REPORTIFA HOTELS & RESORTS – KSC (CLOSED) AND SUBSIDIARIES KUWAIT 30 JUNE 2007

AUDITORS’ REPORTTO THE SHAREHOLDERS OF IFA HOTELS & RESORTS – KSC (CLOSED)KUWAIT

Index Page

Auditors' Report 17

Consolidated Statement of Income 18

Consolidated Balance Sheet 19

Consolidated Statement of Changes in Equity 20

Consolidated Statement of Cash Flows 21

Notes to the Consolidated Financial Statements 22 – 35

Anwar Y. Al-Qatami, F.C.C.A.(Licence No. 50-A)of Grant Thornton – Anwar Al-Qatami & Co.

Kuwait 2 August 2007

Ali Abdul Rahman Al Hasawi (Licence No. 30-A)of BDO Burgan International Accountants

Note Year ended Year ended

30 June 30 June

2007 2006

KD KD

Income

Net income from hoteliers and related services 969,625 1,715,484

Change in fair value of investment properties 27,830 226,961

Gain on sale of shares in a subsidiary company 4 - 5,231,778

Realised loss from sale of investments at fair value through statement of income (179,819) -

Unrealised loss from investments at fair value through statement of income (1,287,261) (312,501)

Realised gain from sale of available for sale investments 127,122 -

Gain on sale of trading properties 5 29,763,918 4,406,274

Share of loss of associated companies (274,718) -

Interest income 2,443,294 1,354,460

Dividend income - 102,155

Other income 1,047,546 653,546

Total income 32,637,537 13,378,157

Expenses and other charges

Operating expenses and other charges 8,122,920 5,316,515

Impairment in value of goodwill 129,303 -

Depreciation 514,008 369,530

Finance costs 361,421 293,507

Total expenses and other charges 9,127,652 5,979,552

Profit before taxation on overseas subsidiaries, KFAS, NLST and board of directors’ remuneration, 23,509,885 7,398,605

Taxation on overseas subsidiaries 58,830 (703,956)

Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS) (213,087) (39,320)

National Labour Support Tax (NLST) (591,908) (96,067)

Board of directors’ remuneration (50,000) (50,000)

Profit for the year 22,713,720 6,509,262

Attributable to :

Shareholders of the parent company 22,821,309 6,796,212

Minority interest (107,589) (286,950)


Basic and diluted earnings per share attributable to the shareholders of the parent company 6 76.81 Fils 22.73 Fils

Note Year ended Year ended30 June 30 June

2007 2006KD KD

AssetsNon-current assetsGoodwill 93,059 218,496Property, plant and equipment 7 9,002,860 6,179,886Capital work in progress 8 29,324,641 16,056,770Investment properties 9 218,425 29,320,753Investment in associated companies 10 10,398,617 2,159,884Investments available for sale 11 22,409,074 16,403,831Total non-current assets 71,446,676 70,339,620

Current assetsAccounts receivable and other assets 12 46,052,059 14,772,460Properties under development 13 61,351,026 25,076,823Trading properties 14 9,340,161 15,459,739Investments at fair value through statement of income 15 3,752,283 5,677,806Cash and cash equivalents 16 32,176,915 34,689,227Total current assets 152,672,444 95,676,055Total assets 224,119,120 166,015,675

Equity and liabilitiesEquityEquity attributable to the shareholders of the parent companyShare capital 17 29,900,000 26,000,000Treasury shares 18 (4,659,835) -Statutory reserve 19 6,294,372 3,926,742Voluntary reserve 19 3,068,290 700,660Cumulative changes in fair value (657,006) -Treasury shares profit reserve 25,131 -Foreign currency translation reserve (2,274,412) (2,014,551)Retained earnings 20,766,764 6,580,715Total equity attributable to the shareholders of the parent company 52,463,304 35,193,566Minority interest 9,106,458 2,124,982Total equity 61,569,762 37,318,548

Non-current liabilitiesInstalment payments due on purchase of properties 20 7,396,039 15,372,165Term loans 21 6,359,751 6,818,872Total non-current liabilities 13,755,790 22,191,037

Current liabilitiesDue to related parties 28 45,114,613 36,035,861Accounts payable and other liabilities 22 42,656,734 10,969,899Advances received from customers 23 61,022,221 59,500,330Total current liabilities 148,793,568 106,506,090Total equity and liabilities 224,119,120 166,015,675

Talal Jassim Al-Bahar

Chairman & Managing DirectorIFA Hotels & Resorts

CONSOLIDATED BALANCE SHEET30 JUNE 2007


CONSOLIDATED STATEMENT OF INCOME30 JUNE 2007


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY30 JUNE 2007

CONSOLIDATED STATEMENT OF CASH FLOWS30 JUNE 2007

Equity attributable to shareholders of the parent company

Treasury Foreign Cumulative shares currency

Treasury Statutory Voluntary changes in profit translation Retained Minority Share capital shares reserve reserve fair value reserve reserve earnings Sub -Total interest Total

KD KD KD KD KD KD KD KD KD KD KD

Balance as at 30 June 2006 26,000,000 - 3,926,742 700,660 - - (2,014,551) 6,580,715 35,193,566 2,124,982 37,318,548

Changes in fair value of available for sale investments - - - - (657,006) - - - (657,006) - (657,006)

Foreign currency translation adjustment - - - - - - (259,861) - (259,861) - (259,861)

Net expense recognised directly in equity - - - - (657,006) - (259,861) - (916,867) - (916,867)

Profit/(loss) for the year - - - - - - - 22,821,309 22,821,309 (107,589) 22,713,720

Total recognised (expense)/income for the year - - - - (657,006) - (259,861) 22,821,309 21,904,442 (107,589) 21,796,853

Bonus shares issued (see Note 25) 3,900,000 - - - - - - (3,900,000) - - -

Purchase of treasury shares - (10,466,724) - - - - - - (10,466,724) - (10,466,724)

Sale of treasury shares - 5,806,889 - - - - - - 5,806,889 - 5,806,889

Profit on sale of treasury shares - - - - - 25,131 - - 25,131 - 25,131

Transfer to reserves - - 2,367,630 2,367,630 - - - (4,735,260) - - -

Changes in minority interest - - - - - - - - - 7,089,065 7,089,065

3,900,000 (4,659,835) 2,367,630 2,367,630 - 25,131 - (8,635,260) (4,634,704) 7,089,065 2,454,361

Balance as at 30 June 2007 29,900,000 (4,659,835) 6,294,372 3,068,290 (657,006) 25,131 (2,274,412) 20,766,764 52,463,304 9,106,458 61,569,762

Balance as at 30 June 2005 4,000,000 - 3,233,582 7,500 - - 18,398 23,170,823 30,430,303 1,789,727 32,220,030

Foreign currency translation adjustment - - - - - - (2,032,949) - (2,032,949) - (2,032,949)

Net expense recognised directly in equity - - - - - - (2,032,949) - (2,032,949) - (2,032,949)

Profit/(loss) for the year - - - - - - - 6,796,212 6,796,212 (286,950) 6,509,262

Total recognised (expense)/income for the year - - - - - - (2,032,949) 6,796,212 4,763,263 (286,950) 4,476,313

Bonus shares issued 22,000,000 - - - - - - (22,000,000) - - -

Transfer to reserves - - 693,160 693,160 - - - (1,386,320) - - -

Changes in minority interest - - - - - - - - - 622,205 622,205

Balance as at 30 June 2006 26,000,000 - 3,926,742 700,660 - - (2,014,551) 6,580,715 35,193,566 2,124,982 37,318,548

Note Year ended Year ended

30 June 30 June

2007 2006

KD KD

OPERATING ACTIVITIES


Adjustments:

Realised loss from sale of investments at fair value through statement of income 179,819 -

Unrealised loss from investments at fair value through statement of income 1,287,261 312,501

Gain on sale of shares in a subsidiary company - (5,231,778)

Realised gain from sale of available for sale investments 127,122 -

Share of loss of associated companies 274,718 -

Change in fair value of investment properties (27,830) (226,961)

Dividend income - (102,155)

Interest income (2,443,294) (1,354,460)

Impairment in value of goodwill 129,303 -

Depreciation 514,008 369,530

22,754,827 275,939

Changes in operating assets and liabilities:

Accounts receivable and other assets (31,279,599) (8,866,004)

Properties under development (7,972,816) -

Trading properties 6,119,578 (1,493,396)

Accounts payable and other liabilities 32,685,531 4,846,789

Due to related parties 9,078,752 14,912,422

Advances received from customers 1,521,891 23,175,794

Net cash from operating activities 32,908,164 32,851,544

INVESTING ACTIVITIES

Net proceeds from sale of shares in a subsidiary company - 6,352,111

Investment in associated company (7,944,579) (2,159,884)

Net additions of property, plant and equipment (3,322,382) (1,058,512)

Purchase of investments at fair value through statement of income (45,879) (818,662)

Proceeds from sale of investments at fair value through statement of income 504,322 -

Additions to investment properties (7,967) -

Proceeds from sale of available for sale investments 817,611 -

Purchase of available for sale investments (7,606,982) (11,664,396)

Additions to capital work in progress (14,277,028) (17,371,018)

Dividend income received - 102,155

Interest income received 2,443,294 1,354,460

Net cash used in investing activities (29,439,590) (25,263,746)

FINANCING ACTIVITIES

Purchase of treasury shares (10,466,724) -

Proceeds from sale of treasury shares 5,832,020 -

Changes in minority interest 7,089,065 (611,625)

Long term liability towards purchase of land (7,976,126) 4,416,702

(Decrease)/increase in term loans (459,121) 6,818,872

Net cash (used in)/from financing activities (5,980,886) 10,623,949

Net (decrease)/increase in cash and cash equivalents (2,512,312) 18,211,747

Cash and cash equivalents at beginning of the year 16 34,689,227 16,477,480

Cash and cash equivalents at end of the year 16 32,176,915 34,689,227


CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS30 JUNE 2007

1 Incorporation and activitiesIFA Hotels & Resorts was established as a limited liability company on 19 July 1995, under the

name “Offset Consulting and Project Management Company – WLL – Najwa Ahmed Abdelaziz

Al-Qatami and Partners”. On 14 May 2005, the company’s name and legal status was changed

to IFA Hotels & Resorts – Kuwaiti Closed Shareholding Company.

IFA Hotels and Resorts – KSC (Closed) ‘the parent company’ and its principal subsidiaries listed in

note 3 a) to the consolidated financial statements are collectively referred to as the “the Group” in

the consolidated financial statements.

The parent company is principally engaged in the following:

• Developing, managing and marketing hotels and resorts.

• Purchasing, selling and development of real estate and land on behalf of the company within or

outside the state of Kuwait. In addition, managing trust holdings, as well as trading private

residential plots, in a manner that is not in violation of the laws relevant to these activities and

their respective provision.

• Holding, purchasing, and selling shares and bonds of real estate companies based both in Kuwait

and outside Kuwait, solely for the company’s benefit and purposes.

• Providing and presenting studies and consultations on all types of real estate issues, subject to

the relevant conditions required of these services.

• Performing maintenance services relating to buildings and real estate owned by the company

including all types of maintenance work and the implementation of civil, mechanical, electrical,

elevator and air conditioning related works whose purpose it is to preserve these buildings and to

ensure their well-being.

• Organising private real estate exhibitions to promote the real estate company’s projects, in

accordance with the ministry’s regulations.

• Preparing real estate auctions.

• Holding and managing commercial and residential complexes.

• Utilization of excess cash in the company’s possession by investing in financial and real estate

portfolios which are managed by specialised and professional parties.

• Direct participation in the establishment of building foundations for residential, commercial,

maintenance, touristic, urban, and athletic buildings and projects using the “Build-Operate-

Transfer” (BOT) method and using BOT to manage the real estate location either for the

company’s, or other parties, benefit.

• The company is also permitted to subscribe and have interests in any activities of parties that are

performing similar activities or that otherwise will help the company realize its objectives within

or outside Kuwait. The company is permitted to participate in construction, to cooperate in joint

ventures, or to purchase these parties either fully or partially.

The Group is a subsidiary of International Financial Advisers (IFA) – KSC (Closed)

The address of the parent company’s registered office is PO Box 4694, Safat 13047, State of Kuwait.

The company’s shares were listed in Kuwait stock exchange on 3 January 2006.

The board of directors of the parent company approved these consolidated financial statements

for issuance on 2 August 2007. The general assembly of the parent company’s shareholders has the

power to amend these consolidated financial statements after issuance.

2 Significant accounting policiesBasis of preparation

The consolidated financial statements of the Group have been prepared in accordance with

International Financial Reporting Standards.

The consolidated financial statements are prepared under the historical cost convention except for

the measurement at fair value of investments at fair value through statement of income, available

for sale investments and investment properties.

The accounting policies are consistent with those used in the previous year except for the new

accounting policy adopted for “Treasury shares”.

IASB Standard issued but not yet effective

The following IASB Standard has been issued but not yet effective, and has not yet been adopted

by the Group.

IFRS 7 Financial Instruments: disclosures

IFRS 8 Operating Segments

IAS 1 Amendment–Presentation of financial statements.

The application of IFRS 7, which will be effective for the year ending 30 June 2008, will result in

amended and additional disclosures relating to financial instruments and associated risks and the

application of IFRS 8, which will be effective for the year ending 30 June 2010 will result in

amended and additional disclosure relating to segment reporting. The amendment to IAS 1, which

will be effective for the year ending 30 June 2008, will result in the group making certain

additional disclosures relating to managing capital.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the parent company

for the year ended 30 June 2007, and the financial statements of its subsidiaries prepared to that

date, or to a date not earlier than three months of the parent company’s year end using

consistent accounting policies.

Subsidiaries are those enterprises controlled by the Group and are fully consolidated from the date

on which control is transferred to the Group. Control is achieved where the Group has the power to

govern the financial and operating policies of an entity so as to obtain benefits from its activities. The

results of subsidiaries acquired or disposed of during the year are included in the consolidated

statement of income from the date of acquisition or up to the date of disposal, as appropriate.

All significant inter-company balances and transactions are eliminated on consolidation.

Minority interest represents the portion of profit or loss and net assets not held by the Group and

is presented separately in the consolidated statement of income and within equity in the consolidated

balance sheet, separately from the equity attributable to the shareholders of the parent company.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to

the Group and the revenue can be reliably measured. The following specific recognition criteria

must also be met before revenue is recognised:

Income from hoteliers

Income from hoteliers and related services is recognised when services are rendered.

Income from sale of properties

Revenue on sale of condominiums is recognised on the basis of percentage completion using the

cost-to-cost method as and when all of the following conditions are met:

• The buyer’s investment, to the date of the financial statements, is adequate (20% and above) to

demonstrate a commitment to pay for the property;

• Construction is beyond a preliminary stage. The engineering, design work, signing of construction

contract, site clearance and building foundation are finished;

• The buyer is committed; and

• The aggregate sales proceeds and costs can be reliably estimated.

Dividends income

Dividends income is recognised when right to receive payment is established.

Fees and commission income

Fees and commission income is recognised when earned.

Interest income

Interest income is recognised using the effective interest method.

Cost of sale of properties

Cost of revenues includes the cost of land and development costs. Development costs include the

cost of infrastructure and construction. The cost of revenues in respect of sale of condominiums is

recognised on the basis of percentage of completion.

Finance cost

Finance costs are calculated and recognised on a time proportionate basis taking into account the

principal loan balance outstanding and the interest rate applicable.

Financial instruments

Classification

The Group classifies financial assets upon initial recognition into the following categories:

i. Investments at fair value through statement of income

ii. Loans and receivables

iii. Available for sale investments

Financial liabilities are classified as “non trading financial liabilities”.

Investments at fair value through statement of income are either ‘held for trading’ or ‘designated’

as such on initial recognition.

The Group classifies investments as trading if they are acquired principally for the purpose of

selling or are a part of a portfolio of identified financial instruments that are managed together

and for which there is evidence of a recent actual pattern of short term profit taking.

Investments are classified as designated at fair value through statement of income at inception if they

have readily available reliable fair values and the changes in fair values are reported as part of the

statement of income in the management accounts, according to a documented investment strategy.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that

are not quoted in an active market and are classified as accounts receivable and other assets in the

balance sheet.

Financial assets which are not classified as above are classified as available for sale investments.

Management determines the classification of these financial instruments at the time of acquisition.

Measurement

Investments at fair value through statement of income

Investments at fair value through statement of income are initially recognised at cost, being the

fair value of the consideration given, excluding transaction costs.

Subsequent to initial recognition, investments at fair value through statement of income are re-measured

at fair value and changes in fair value are recognised in the consolidated statement of income.

Loans and receivables

Loans and receivables are stated at amortised cost using the effective interest method.

Available for sale investments

Available for sale investments are initially recognised at cost, being the fair value of the consideration

given, plus transaction costs that are directly attributable to the acquisition.


CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

30 JUNE 2007

2 Significant accounting policies (continued)Subsequent to initial recognition, available for sale investments are re-measured at fair value unless

fair value cannot be reliably measured, in which case they are stated at cost.

Changes in fair value of available for sale investments are recognised as a separate component in

equity under ‘cumulative changes in fair value’ account until the investment is either derecognised

or determined to be impaired. On derecognition or impairment, the cumulative gain or loss previously

recognised in equity is recognised in the consolidated statement of income.

Financial liabilities

Non-trading financial liabilities are stated at amortised cost using the effective interest method.

Fair values

For investments traded in organised financial markets, fair value is determined by reference to

stock exchange quoted market bid prices at the close of business on the balance sheet date.

For investments where there is no quoted market price, a reasonable estimate of fair value is

determined by using valuation techniques. The group uses a variety of methods and makes

assumptions that are based on market conditions existing at each balance sheet date. Valuation

techniques used include the use of comparable recent arm’s length transactions, discounted cash

flow analysis and other valuation techniques commonly used by market participants.

Trade and settlement date accounting

All ‘regular way’ purchases and sales of financial assets are recognised on the trade date, i.e. the

date that the Group commits to purchase or sell the asset. Regular way purchases or sales are

purchases or sales of financial assets that require delivery of assets within the time frame generally

established by regulations or conventions in the market place concerned.

Recognition and derecognition of financial assets and liabilities

A financial asset or a financial liability is recognised when the Group becomes a party to the

contractual provisions of the instrument.

A financial asset (in whole or in part) is derecognised when the contractual rights to receive cash

flows from the financial asset has expired or the Group has transferred substantially all risks and

rewards of ownership and has not retained control. If the Group has retained control, it shall

continue to recognise the financial asset to the extent of its continuing involvement in the

financial asset. A financial liability is derecognised when the obligation specified in the contract is

discharged, cancelled or expired.

Impairment of financial assets

An assessment is made at each balance sheet date to determine whether there is objective

evidence that a specific financial asset may be impaired. If such evidence exists, any impairment

loss is recognised in the consolidated statement of income. Impairment is determined as follows:

(a) For financial assets carried at fair value, impairment is the difference between carrying value

and fair value; and

(b) For financial assets carried at cost, impairment is the difference between carrying value and

the present value of future cash flows discounted at the current market rate of return for a

similar financial asset.

Reversal of impairment losses recognised in prior years is recorded when there is an indication that

the impairment losses recognised for the financial asset no longer exist or have decreased and the

decrease can be related objectively to an event occurring after the impairment was recognised.

Except for reversal of impairment losses related to equity instruments classified as available for

sale, all other impairment reversals are recognised in the consolidated statement of income to the

extent the carrying value of the asset does not exceed its amortised cost at the reversal date.

Impairment reversals in respect of equity instruments classified as available for sale are recognised

in the cumulative changes in fair value.

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be

impaired. If any such indication exists, or when annual impairment testing for an asset is required,

the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is

the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use

and is determined for an individual asset, unless the asset does not generate cash inflows that are

largely independent of those from other assets or groups of assets and then its recoverable

amount is assessed as part of the cash-generating unit to which it belongs. Where the carrying

amount of an asset (or cash-generating unit) exceeds its recoverable amount, the asset (or cash-

generating unit) is considered impaired and is written down to its recoverable amount by

recognising impairment loss in the consolidated income statement. In assessing value in use, the

estimated future cash flows are discounted to their present value using a discount rate that

reflects current market assessments of the time value of money and the risks specific to the asset

(or cash-generating unit). In determining fair value less costs to sell an appropriate valuation

model is used. These calculations are corroborated by available fair value indicators.

An assessment is made at each reporting date as to whether there is any indication that previously

recognised impairment losses may no longer exist or may have decreased. If such indication exists,

the Group makes an estimate of recoverable amount. A previously recognised impairment loss is

reversed only if there has been a change in the estimates used to determine the assets recoverable

amount since the last impairment loss was recognised. If that is the case, the carrying amount of

the asset is increased to its recoverable amount.

Investment in associates

An associate is a company over which the Group has significant influence usually evidenced by

holding of 20% to 50% of the voting power of the investee company. The consolidated financial

statements include the Group’s share of the associates’ results using the equity method of accounting.

Under the equity method, investment in an associate is initially recognised at cost and adjusted

thereafter for the post-acquisition change in the Group’s share of net assets of the investee.

The Group recognises in the consolidated statement of income its share of the total recognised profit

or loss of the associate from the date the influence or ownership effectively commenced until the date

that it effectively ceases. Distributions received from an associate reduce the carrying amount

of the investment. Adjustments to the carrying amount may also be necessary for changes in

the Group’s share in the associate, arising from changes in the associates equity that have not

been recognised in the associate’s statement of income. The Group’s share of those changes

is recognised directly in equity. The financial statements of the associates are prepared either to the

reporting date of the parent company or to a date not earlier than three months of the parent

company’s reporting date, using consistent accounting policies.

Unrealised gains on transactions with associates are eliminated to the extent of the Group’s share

in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of

impairment in the asset transferred. An assessment for impairment of investments in associates is

performed when there is an indication that the asset has been impaired, or that impairment losses

recognised in prior years no longer exist.

Jointly controlled entities

The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation.

The Group combines its share of the joint ventures’ individual income and expenses, assets and

liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial

statements. The Group recognises the portion of gains or losses on the sale of assets by the Group

to the joint venture that is attributable to the other venturers. The Group does not recognise its

share of profits or losses from the joint venture that results from the Group’s purchase of assets

from the joint venture until it resells the assets to an independent party. However, a loss on the

transactions is recognised immediately if the loss provides evidence of a reduction in the net

realisable value of current assets, or an impairment loss.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment

losses. Depreciation is calculated to write-off the cost less the estimated residual value of property,

plant and equipment on a straight-line basis over their estimated useful lives as follows:

Buildings 50 years

Plant and equipment 5-7 years

Motor vehicles 4-5 years

Furniture and fixtures 5-7 years

Yacht 10 years

Lease–hold property is depreciated over the period of the lease. No depreciation is provided on

freehold land.

Investment properties

Investment properties are initially recorded at cost, being the purchase price and any directly

attributable expenditure for a purchased investment property and cost at the date when

construction or development is complete for a self-constructed investment property. Subsequent

to initial recognition, investment properties are re-measured at fair value on an individual basis

based on a valuation by a professionally qualified valuer. Changes in fair values are taken to the

consolidated statement of income.

Investment properties are derecognised when either they have been disposed of or when the

investment property is permanently withdrawn from use and no future economic benefit is

expected from its disposal. Any gains or losses on the retirement or disposal of an investment

property are recognised in the statement of income in the year of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change in use, evidenced

by the end of owner occupation, commencement of an operating lease to another party or

completion of construction or development. Transfers are made from investment property when,

and only when, there is a change in use, evidenced by commencement of owner occupation or

commencement of development with a view to sale.

Accounts receivable

Accounts receivable are stated at original invoice amount less provision for any uncollectible amounts.

An estimate for doubtful debts is made when collection of the full amount is no longer probable.

Bad debts are written off as incurred.

Property under development

Property under development represents properties under development/construction for trade,

which are stated at cost or net realisable values which ever is lower. Cost includes the cost of land,

construction, design and architecture, advances paid for purchase of properties and other related

expenditures such as professional fees, project management fees and engineering costs

attributable to the project, which are accrued as and when activities that are necessary to get the

assets ready for the intended use are in progress. Direct costs from the start of the project up to

completion of the project are accrued to property under development. Completion is defined as

the earlier of the issuance of the certificate for completion, or when management considers the

project to be completed. Upon completion, unsold properties, if any are transferred to trading

properties. Property under development is disclosed net of transfer to cost of properties sold

during the year.

Deposits received from customers

Deposits received from customers represent money received from customers towards instalments

for properties in accordance with the terms of the sale agreements. Deposits received from

customers are disclosed net of revenue recognised during the year.

Trading properties

Trading properties include purchase and development costs of unsold real estate (land).

Development costs include planning, maintenance and service costs. Trading properties are

recorded at the lower of cost and net realizable value.

Term loans

Term loans are carried at amortised cost.

Accounts payable and accruals

Liabilities are recognised for amounts to be paid in future for goods or services received, whether

or not billed to the group.



30 JUNE 2007

2 Significant accounting policies (continued)Leases

Leases where a significant portion of the risks and rewards of ownership are retained by the leaser

are classified as operating leases. Payments made under operating leases are charged to the

income statement on straight line basis over the period of the lease.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive)

resulting from a past event and the costs to settle the obligation are both probable and able

to be reliably measured.

Employees’ end of service benefits

Provision is made for employees’ end of service benefits in accordance with the applicable

Labour Laws based on employees’ salaries and accumulated periods of service or on the basis

of employment contracts, where such contracts provide extra benefits.

Cash and cash equivalents

Cash and cash equivalents represent cash and bank balances and term deposits maturing within

three months from the date of inception.

Treasury shares

The parent company’s holding in its own shares is accounted for as treasury shares. Such shares

are stated at cost as a deduction within shareholders’ equity and no cash dividends are distributed

on these shares.

Gains resulting from the parent company trading in treasury shares are taken directly to equity

under ‘treasury shares profit reserve’. Should the reserve fall short of any losses from the sale of

treasury shares, the difference is charged to retained profits then reserves. Subsequent to this,

should profits arise from sale of treasury shares an amount is transferred to reserves then retained

profits equal to the loss previously charged to these accounts.

Foreign currencies

Functional and presentation currency

The consolidated financial statements are presented in Kuwaiti Dinars, which is the parent

company’s functional and presentational currency. Each entity in the group determines its own

functional currency and items included in the financial statements of each entity are measured

using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency rate of exchange

ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional

currency rate of exchange ruling at the balance sheet date. All differences are taken to “foreign

exchange gain/loss” in the consolidated statement of income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are

translated using the exchange rates as at the dates of the initial transactions. Non-monetary

items measured at fair value in a foreign currency are translated using the exchange rates at the

date when the fair value was determined. Any goodwill arising on the acquisition of a foreign

operation and any fair value adjustments to the carrying amounts of assets and liabilities arising

on the acquisition are treated as assets and liabilities of the foreign operations and translated at

closing rate.

Group companies

As at the reporting date, the assets and liabilities of foreign subsidiaries are translated into the

parent company’s presentation currency (the Kuwaiti Dinars) at the rate of exchange ruling at the

balance sheet date, and their statements of income are translated at the average exchange rates

for the year. Exchange differences arising on translation are taken directly to foreign exchange

translation reserve within equity. On disposal of a foreign entity, the deferred cumulative amount

recognised in equity relating to the particular foreign operation is recognised in the consolidated

statement of income.

Judgements

In the process of applying the group’s accounting polices, management has made the following

judgements, apart from those involving estimations, which have the most significant effect on the

amounts recognised in the consolidated financial statements:

Classification of real estate property

Management decides on acquisition of a real estate property whether it should be classified as

trading, under development, capital-work-in-progress or investment property.

The Group classifies property as trading property if it is acquired principally for sale in the ordinary

course of business.

The Group classifies property as properties under development if it is acquired, with the intention

of development with a view to sale.

The Group classifies property as capital work-in progress if the property is acquired with the

intention of development for the purpose of it being used as investment property or owner

occupied property.

The Group classifies property as investment property if it is acquired to generate rental income or

for capital appreciation, or for undetermined future use.

Classification of financial assets

Management decides on acquisition of an investment whether it should be classified as held for

trading, designated at fair value through statement of income, loans and receivables or available

for sale. In making that judgement the Group considers the primary purpose for which it is

acquired and how it intends to manage and report its performance. Such judgement determines

whether it is subsequently measured at cost or at fair value and if the changes in fair value of

instruments are reported in the statement of income or directly in equity.

Impairment of investments

The Group treats available for sale equity investments as impaired when there has been a

significant or prolonged decline in the fair value below its cost or where other objective evidence of

impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires considerable

judgement. In addition, the Group evaluates other factors, including normal volatility in share price

for quoted equities and the future cash flows and the discount factors for unquoted equities.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the

balance sheet date, that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year are discussed below:

Valuation of unquoted equity investments

Valuation of unquoted equity investments is normally based on one of the following:

• Recent arm’s length market transactions;

• Current fair value of another instrument that is substantially the same; or

• The expected cash flow discounted at current rates applicable for items with similar terms

and risk characteristics;

• Other valuation models.

The determination of the cash flows and discount factors for unquoted equity investments

requires significant estimation. There are certain investments where this estimation cannot be

reliably determined, and as a result available for sale investments with a carrying amount of

KD12,099,879 (2006: KD10,328,550) are carried at cost.

Estimation of useful lives of property, plant and equipment

The Group’s management determines the useful lives and related depreciation charge. The

depreciation charge for the year will change significantly if actual life is different from the

estimated useful life of the asset.

3 Subsidiary companies and joint ventures

a) Subsidiary companies

The principal consolidated subsidiaries are as follows:

Consolidated subsidiaries Country of incorporation Principal activity Incorporation/ Percentage ownership %

acquisition date

IFA Hotels & Resorts FZ – LLC UAE Property development 2003 100%

IFA Hotels & Resorts – Jabel Ali Free Zone UAE Property development 2005 100%

IFA Hotels & Resorts (SAL) Holdings Lebanon Property development 2003 51%

IFA Zimbali Hotels & Resorts (Pty) Ltd. South Africa Property development 2003 100%

IFA Hotels & Resorts Limited South Africa Hotelier and property developer 2003 85%

IFA Hotels & Resorts 2 Limited Tanzania Hotelier 2003 70%

IFA Hotels & Resorts (Zanzibar) Ltd. Tanzania Hotelier 2003 99%

IFA Hotels & Resorts 3 Limited Mauritius Property development 2006 100%

3 Subsidiary companies and joint ventures (continued)

b) Joint ventures

The Group has interest in the following joint ventures which are included in the consolidated

balance sheet and consolidated statement of income on the proportional consolidation basis.

The following amount represent the Group’s share of assets, liabilities, income, expenses and profit

of the joint ventures:

2007 2006

KD KD

Assets 7,449,321 10,936,705

Liabilities (1,605,671) (5,621,550)

Equity 5,843,650 5,315,155

Income 2,312,120 6,827,414

Direct cost and other expenses (865,577) (3,747,909)

Profit 1,446,543 3,079,505

4 Gain on sale of shares in a subsidiary companyDuring the previous year, as part of the initial public offering the group sold 15% of its wholly owned

subsidiary, IFA Hotels & Resorts Limited (South Africa) for a total consideration equivalent to

KD6,352,111, which resulted in a profit of KD5,231,778 being recognised in the statement of income.

5 Gain on sale of trading propertiesThis represents the value and cost of properties originally purchased by the Group and resold to

customers. Income recognised on these properties is determined based on the percentage of

completion method as follows:

2007 2006

KD KD

Sales revenue 75,945,921 17,601,271

Cost of sales (46,182,003) (13,194,997)

29,763,918 4,406,274

6 Basic and diluted earnings per share attributable to the shareholders of the parent companyEarnings per share is computed by dividing the profit for the year attributable to the shareholders of

the parent company by the weighted average number of shares outstanding during the year as follows:

2007 2006

Profit for the year attributable to the

shareholders of the parent company (KD) 22,821,309 6,796,212

Weighted average number of shares

outstanding during the year

(excluding treasury shares) 297,119,018 299,000,000

Basic and diluted earnings per share 76.81 Fils 22.73 Fils

The weighted average number of shares outstanding during the previous year has been adjusted to

reflect the 15% bonus shares of 39,000,000 approved by the general assembly held on 30 October

2006 (Note 25).



30 JUNE 2007

7 Property, plant and equipment

Furniture,

Buildings on Buildings on Plant and fixtures and

Land freehold land leasehold land equipment office equipment Motor vehicles Yacht Total

KD KD KD KD KD KD KD KD

At 1 July 2005

Cost 1,810,523 2,455,830 621,832 279,444 585,731 125,417 - 5,878,777

Accumulated depreciation - (63,011) (31,545) (37,917) (212,136) (43,264) - (387,873)

Net book amount 1,810,523 2,392,819 590,287 241,527 373,595 82,153 - 5,490,904

Year ended 30 June 2006

Opening net book amount 1,810,523 2,392,819 590,287 241,527 373,595 82,153 - 5,490,904

Additions 3,409,258 44,025 580,370 8,025 195,152 11,478 2,231,970 6,480,278

Reclassification (see 7.1) (4,819,083) - - (6,829) (43,862) - - (4,869,774)

Disposals - - - (456) (1,987) (82) - (2,525)

Foreign exchange adjustment (258,146) (259,354) 863 (58,079) 10,613 14,636 - (549,467)

Depreciation charge for the year - (93,270) (18,931) (40,959) (180,112) (36,258) - (369,530)

Closing net book amount 142,552 2,084,220 1,152,589 143,229 353,399 71,927 2,231,970 6,179,886

At 30 June 2006

Cost 142,552 2,257,934 1,202,202 226,413 728,878 158,757 2,231,970 6,948,706

Accumulated depreciation - (173,714) (49,613) (83,184) (375,479) (86,830) - (768,820)

Net book amount 142,552 2,084,220 1,152,589 143,229 353,399 71,927 2,231,970 6,179,886

Year ended 30 June 2007

Opening net book amount 142,552 2,084,220 1,152,589 143,229 353,399 71,927 2,231,970 6,179,886

Additions 17,430 115,678 3,642,065 6,953 378,620 59,395 27,152 4,247,293

Reclassification 35,354 2,367 42,419 8,069 (103,515) 35 15,271 -

Disposals - - (46,613) (214) (23,315) (8,905) (845,864) (924,911)

Foreign exchange adjustment 2,096 20,075 (9,407) 900 804 76 56 14,600

Depreciation charge for the year - (76,747) (83,242) (24,546) (144,066) (27,954) (157,453) (514,008)

Closing net book amount 197,432 2,145,593 4,697,811 134,391 461,927 94,574 1,271,132 9,002,860

At 30 June 2007

Cost 197,432 2,373,403 4,825,963 207,917 911,855 182,820 1,430,557 10,129,947

Accumulated depreciation - (227,810) (128,152) (73,526) (449,928) (88,246) (159,425) (1,127,087)

Net book amount 197,432 2,145,593 4,697,811 134,391 461,927 94,574 1,271,132 9,002,860

7.1 During the previous year, the group reclassified an amount of KD4,819,083 (Rand 120,266,611)

from property, plant and equipment to trading properties as it represents the cost of land purchased

with a purpose of trading after development in one of the subsidiary companies in South Africa.

7.2 Land and building with a carry value of KD2,234,391 located in South Africa have been pledged as

security for the term loan facility obtained by a South African subsidiary (see note 21).

Name and details of the joint ventures Country of registration/ Interest %incorporation

Interest in Moorland/IFA Hotels & Resorts South Africa 50%Development (the principal activity of the joint venture is property development)

Interest in Zimbali Estates (PTY) Ltd. South Africa 50%(the principal activity of the joint venture isthe sale of developed property)



30 JUNE 2007

8 Capital work in progressCapital work in progress represents mainly hotels under construction in Dubai, UAE.

The movement in capital work in progress is as follows:

2007 2006

KD KD

Carrying value at 1 July 16,056,770 889,310

Discount on early payment (864,336) -

Additions 14,277,028 15,178,946

Foreign exchange adjustments (144,821) (11,486)

Carrying value at 30 June 29,324,641 16,056,770

The above balance consists of the following:

2007 2006

KD KD

Land cost

- The Trunk, The Palm Jumeirah 6,748,980 6,810,405

- Crescent, The Palm Jumeirah 6,283,587 7,212,980

- Golden Mile, The Palm Jumeirah 1,220,915 165,007

14,253,482 14,188,392

Construction, piling and enabling work 11,845,888 409,892

Other construction related costs 3,225,271 1,458,486

29,324,641 16,056,770

9 Investment propertiesThe movement in investment properties is as follows:

2007 2006

KD KD

Carrying value at 1 July 29,320,753 29,093,792

Discount on early payment (576,224) -

Additions during the year 7,967 -

Transfer to property under

developments (see note 9b.) (28,301,387) -

Change in fair value 27,830 226,961

Foreign currency translation adjustment (260,514) -

Carrying value at 30 June 218,425 29,320,753

The investment properties consist of the following:

2007 2006

KD KD

Crescent, The Palm Jumeriah [freehold land in the - 29,140,438

crescent area (Al-Hilal) – Al-Jumeira – Dubai,

represents 40% of the total land in that area]

Private freehold land in 218,425 180,315

“IFA Zimbali Hotels & Resorts”–

South Africa

218,425 29,320,753

9a) The Group’s investment properties were revalued at 30 June 2007 by professionally qualified

external valuers with experience in the respective real estate markets based on open market

value method.

9b) During the year, properties in the United Arab Emirates with a value of KD28,301,387

(AED362,791,786) were transferred to properties under development (see note 13) as the

management intends to construct and sell freehold apartments, villas, townhouses,

penthouses, vacation club and heritage place on this plot of land .

10 Investment in associated companiesDetails of associates are as follows:

Name and particulars of the company Interest 2007 2006

in equity KD KD

Boschendal (Pty) Ltd. (Registered in 26.57% 2,451,419 2,159,883

South Africa and its principal activity

is providing banking services)

Purple Plum Properties Limited 26.57% 1 1

(Registered in South Africa and its

principal activity is property development)

Raimon Land Public Company Limited 24.99% 7,947,197 -

(Registered in Thailand and its principal

activity is property development)

10,398,617 2,159,884

Aggregate share of associates’ balance sheets:

2007 2006

KD KD

Assets 18,515,803 2,429,658

Liabilities (8,117,186) (269,774)

Equity 10,398,617 2,159,884

Aggregate share of associates’ revenue and losses:

Revenue 736,590 -

Losses (274,718) -

The fair market value of Raimon Land Public Company Limited quoted shares is KD5,665,033. The

fair value of the other associate could not be reliably measured since it is unquoted.

11 Investments available for sale 2007 2006

KD KD

Foreign investments – quoted shares 581,871 -

Foreign investments – unquoted shares 12,245,029 10,621,060

Foreign investments – principal 8,395,350 5,782,771

guaranteed instruments (see note 11a)

Local investments – quoted shares 1,076,824 -

Local investments – unquoted shares 110,000 -

22,409,074 16,403,831

11a The above foreign principal guaranteed instruments are denominated in US Dollars and issued

by foreign banks and carry effective interest rates ranging from 7.25% to 11.25% per annum.

12 Accounts receivable and other assets2007 2006

KD KD

Accounts receivable and advances 25,000,317 10,154,279

Due from related parties 16,655,876 3,011,264

Deposits and prepayments 592,444 542,663

Other receivables 3,803,422 1,064,254

46,052,059 14,772,460

13 Properties under development2007 2006

KD KD

Land cost

- The Trunk, The Palm Jumeirah 7,592,602 9,969,770

- Jumeirah Lake, Dubai 3,388,412 2,005,365

- Golden Mile, The Palm Jumeirah 4,441,885 1,485,066

- Crescent, The Palm Jumeirah (see note 9b.) 28,301,387 -

43,724,286 13,460,201

Construction, piling and enabling works 9,482,159 6,082,056

Other construction related costs 8,144,581 5,534,566

61,351,026 25,076,823

14 Trading properties2007 2006

KD KD

Residential flats in Dubai, UAE 942,085 7,551,598

Properties in South Africa 8,398,076 7,908,141

9,340,161 15,459,739

Trading properties in Dubai represents the total cost of residential flats in buildings purchased

from the developer in Dubai, UAE for trading purposes.

Trading properties in South Africa represents plots of lands purchased in South Africa for trading

purposes and comprises land at cost and development expenditure attributable to unsold

properties.

The Group uses the percentage of completion method in recognising the income generated from

selling these flats.

15 Investments at fair value through statement of income2007 2006

KD KD

Held for trading:

Local quoted shares 3,752,283 5,677,806



30 JUNE 2007

16 Cash and cash equivalents2007 2006

KD KD

Cash and bank balances 17,869,996 25,006,777

Term deposits – due within three months 14,306,919 9,682,450

32,176,915 34,689,227

17 Share capitalThe general assembly meeting of the shareholders of the parent company held on 30 October

2006 approved an increase in the share capital from KD26,000,000 to KD29,900,000 by way of

issuance of 15% bonus shares amounting to KD3,900,000.

At 30 June 2007, the authorised, issue and paid-up capital of the parent company comprised

299,000,000 (2006: 260,000,000) shares of 100 fils each.

18 Treasury sharesAt 30 June 2007 the parent company held 4,234,000 (2006: Nil) of its own shares, equivalent to

1.416% of the total issued share capital at that date. The market value of these shares at the

balance sheet date was KD4,657,400. Reserves of the parent company equivalent to the cost of

the treasury shares have been earmarked as non-distributable.

19 Statutory and voluntary reservesAs required by the Commercial Companies Law and the parent company’s articles of association,

10% of the profit for the year before KFAS, NLST and board of directors remuneration but after

taxation on overseas subsidiaries and minority interest is transferred to the statutory reserve until

the balance reaches 50% of the parent company’s issued and paid-up capital. Any transfer to the

statutory reserve thereafter is subject to approval from the general assembly. No transfer is

required in a year when losses are made. Distribution of the statutory reserve is limited to the

amount required to enable the payment of a dividend of 5% of paid-up share capital to be made

in years when retained earnings are not sufficient for the distribution of a dividend of that amount.

Subject to the approval of the general assembly, the parent company’s board of directors propose

to transfer 10% of the profit for the year before KFAS, NLST and board of directors remuneration

but after taxation on overseas subsidiaries and minority interest, to the voluntary reserve.

20 Instalment payments due on purchase of propertiesThese instalments as at 30 June 2007 represent amounts payable on the purchase of land in the

crescent on The Palm Jumeira, Dubai, UAE and the land located at Jumirah Lake, Dubai, UAE

(classified as capital work in progress and property under development) which will be settled over

a period of five years. The maturity details of the instalments due are as follows:

2007 2006

KD KD

Amounts due within one year (see note 22) 7,455,683 2,784,434

Amounts due after one year 7,396,039 15,372,165

Total amount due 14,851,722 18,156,599

21 Term loansEffective interest rates % 2007 2006

KD KD

Term loan – Dubai 5% 5,010,192 5,055,792

Term loan – South Africa 13% 1,349,559 1,763,080

6,359,751 6,818,872

Term loans represent loans obtained by the subsidiaries in Dubai and South Africa to finance the

projects in Dubai and the purchase of properties in South Africa. The loan obtained by the South

African subsidiary is secured against the mortgage of those properties with a carrying value of

KD2,234,391.

22 Accounts payables and other liabilities2007 2006

KD KD

Accounts payable 4,883,627 2,612,711

Accrued construction costs 22,527,659 -

Instalment payments due on purchase

of properties – current portion

(see note 20) 7,455,683 2,784,434

Accruals 1,437,981 582,033

Deferred tax 936,199 1,251,815

Deferred income 1,097,490 2,038,966

Other payables 4,318,095 1,699,940

42,656,734 10,969,899

23 Advances received from customersThese balances represents amounts collected from customers in advance on the sale of residential

flats currently under construction by a subsidiary company in Dubai, UAE.

24 Staff costsThe total staff costs of the group for the year ended 30 June 2007 amounted to KD2,487,596

(2006: KD2,127,589).

25 Proposed dividendsSubject to the requisite consent of the relevant authorities and approval from the general

assembly, the parent company’s board of directors propose a cash dividend of 30 Fils (2006: Nil)

per share and the issue of 15% (2006: 15%) of the paid-up share capital as at 30 June 2007 as

bonus shares.

The proposed bonus shares of 15% of paid up share capital amounting to KD3,900,000, for the

year ended 30 June 2006 to the shareholders of record on the date of the general assembly, was

approved at the general assembly held on 30 October 2006 and distributed subsequently.

26 Segmental informationFor management purpose the Group’s primary format for reporting segment information is

geographical segments with secondary information reported for business segments.

Primary segment information – geographical segments

The Group operates in four main geographical segments: Kuwait, Asia and other Middle Eastern

countries, Africa and Europe. The geographical analysis of segment information is as follows:

30 June 2007 Income statement Kuwait KD Asia and Middle East KD Africa KD Europe KD Total KD

Segment revenue (1,339,958) 30,484,273 3,493,222 - 32,637,537

Segment result (1,766,105) 25,098,980 185,840 - 23,518,715

Unallocated corporate expenses (804,995)

Profit for the year 22,713,720

Balance sheet

Segment assets 25,047,142 163,518,941 31,573,474 3,979,563 224,119,120

Segment liabilities (45,981,080) (110,450,826) (6,117,452) - (162,549,358)

Total equity (20,933,938) 53,068,115 25,456,022 3,979,563 61,569,762

Depreciation 149,552 196,200 168,256 - 514,008

30 June 2006 Income statement

Segment revenue 5,021,432 3,480,865 4,875,860 - 13,378,157

Segment result 5,271,879 552,489 820,281 - 6,644,649

Unallocated corporate expenses (135,387)

Profit for the year 6,509,262

Balance sheet

Segment assets 16,379,119 125,394,617 20,597,316 3,644,623 166,015,675

Segment liabilities (35,521,548) (90,848,903) (2,326,676) - (128,697,127)

Total equity (19,142,429) 34,545,714 18,270,640 3,644,623 37,318,548

Depreciation - 102,529 267,001 - 369,530

Secondary segment information - business segments

A segmental analysis of total assets employed and revenue by business segment are as follows:

Assets Assets Revenue Revenue

2007 KD 2006 KD 2007 KD 2006 KD

Investments 39,406,731 22,506,790 (1,339,958) 4,919,277

Hoteliers and property development 204,712,389 143,508,885 33,977,495 8,458,880

224,119,120 166,015,675 32,637,537 13,378,157



30 JUNE 2007

27 Capital commitmentsCapital expenditure commitments

At 30 June 2007, the Group was committed to invest in the additional anticipated funding

required to build several real estate projects in Dubai, UAE and Beirut, Lebanon. The estimated

funding commitments on these projects are as follows:

2007 KD 2006 KD

Capital expenditure for purchase 42,427,618 10,246,858

of properties contracted

Estimated and contracted capital 171,396,487 203,504,561

expenditure for construction

of properties

213,824,105 213,751,419

The Group expects to finance the future expenditure commitments from the following sources:

a) sale of investment properties;

b) advances from customers;

c) raising additional share capital;

d) advances provided by shareholders, related entities, joint ventures; and

e) borrowings, if required.

Expected financing rates from the above sources are dependent on the source of financing and

management estimates of the best financing available at the time they become due.

In addition to this, the Group has finance lease commitment with a value of KD468,144

(2006: KD617,950).

28 Related party transactionsThese represent transactions with related parties, that is, major shareholders, directors and senior

management personnel of the parent company, and companies of which they are principal owners

or over which they are able to exercise significant influence or joint control. Pricing policies and

terms of these transactions are approved by the parent company’s management.

Significant transactions with related parties included in the consolidated financial statements are

as follows:

2007 KD 2006 KD

Consolidated balance sheet:

Amounts due from related parties (see note 12) 16,655,876 3,011,264

Amount due to ultimate parent company 43,533,401 35,044,314

Amounts due to other related parties 1,581,212 991,547

Purchase of investments available for sale - 3,644,624

Transactions included in the consolidated statement

of income:

Finance costs 315,039 -

Interest income 522,386 -

Compensation of key management personnel of

the Group

Short-term employee benefits 258,728 160,173

Related party balances outstanding at year end due to funds transfer are included under due from

related parties and due to related parties.

29 Risk managementInterest rate risk

Calls accounts and deposits carry interests at commercial rates and mature within three months

from the deposit date.

The interest rates related to term loans are disclosed in note 21 to the consolidated financial statements.

Credit risk

Financial assets, which potentially subject the group to concentrations of credit risk, consist

principally of bank balances, term deposits, due from related parties and accounts receivable and

other assets. The group’s bank balances and term deposits are placed with financial institutions of

high credit standings and due from related parties, accounts receivable and other assets are

presented net of appropriate provisions.

Foreign currency risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to

changes in foreign exchange rates. The Group views itself as a Kuwaiti entity, with the Kuwaiti

Dinar as its functional currency. The Group’s management believes that there is minimal risk of

significant losses due to exchange rate fluctuations and consequently the Group does not hedge

foreign currency exposure.

Market risk

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes

in market prices, whether those changes are caused by factors specific to the individual security, or

its issuer, or factors affecting all securities traded in the market.

The Group is exposed to market risk with respect to its investments securities.

The Group limits market risk by maintaining a diversified portfolio and by continuous monitoring

of developments in international and local equity markets. In addition, the Group actively monitors

the key factors that affect stock market movements, including analysis of the operational and

financial performance of investees.

Liquidity risk

Liquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due. To

limit this risk, management has arranged diversified funding sources, manages assets with liquidity

in mind, and monitors liquidity on a daily basis.

30 Fair value of financial instrumentsFair value represents amounts at which an asset could be exchanged or a liability settled on

an arm’s length basis. In the opinion of the parent company’s management, except for certain

available for sale investments which are carried at cost for reasons specified in Note 2 to the

consolidated financial statements (under the heading ‘Estimation uncertainty’), the carrying

amounts of financial assets and liabilities as at 30 June 2007 and 2006 approximate their

fair values.

31 Comparative figuresCertain comparative figures have been re-grouped and re-classified in order to conform to the

presentation of the current year and does not affect previously reported consolidated net assets,

net shareholder’s equity, profit for the year or net increase in cash and cash equivalents.